The Federal Trade Commission announced revised Hart-Scott-Rodino (“HSR”) filing thresholds on January 24, 2022, as required by the HSR Act, based on the change in the US gross national product. The new minimum HSR “Size of Transaction” threshold is increasing to $101 million from the prior threshold of $92 million. The increase of $9 million, or 9.8%, is the largest annual adjustment to the minimum HSR filing threshold since the adjustments began in 2005. The new threshold will apply to transactions closing on or after February 23, 2022. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.
An HSR filing may be required when, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. The Size of Transaction may also include contingent payments, earnouts, liabilities, and certain debt retired as consideration for the transaction. Talk to HSR counsel to determine your Size of Transaction.
|Size of Transaction Test|
Closing before February 23, 2022
Closing on or after February 23, 2022
|>$92 million||>$101 million|
If the transaction will close before February 23, 2022, the $92 million threshold still applies; closings on or after February 23, 2022 will be subject to the higher $101 million threshold.
Certain transactions that satisfy the Size of Transaction threshold must also satisfy the “Size of Person” thresholds to be HSR-reportable. These adjusted thresholds are also effective for all closings on or after February 23, 2022. While the general Size of Person test is set out below, an alternative test may apply to transactions where the Acquired Person is not engaged in manufacturing. Talk to HSR counsel to determine which entity’s sales and assets must be evaluated and which test applies.
|Size of Person Test|
|Size of Transaction >$101 million, but ≤$403.9 million||One party (or its Ultimate Parent Entity) has ≥$202 million in total assets or annual net sales, and|
|The other party (or its Ultimate Parent Entity) has ≥$20.2 million in total assets or annual net sales|
|Size of Transaction >$403.9 million||Reportable regardless of the Size of Person test|
For all HSR filings, one filing fee is required per acquisition. The amount of the filing fee is based on the Size of Transaction. Below are the adjusted fee ranges for 2022.
|Size of Transaction||Filing Fee|
|More than $101 million, but less than $202 million||$45,000|
|$202 million or greater, but less than $1.0098 billion||$125,000|
|$1.0098 billion or greater||$280,000|
Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance. The maximum civil penalty for HSR violations also adjusts annually and the adjusted maximum civil penalty as of January 10, 2022 is set out below.
|Failure to File Penalty|
|Up to $46,517 per day in violation|
Always consult HSR counsel to determine whether your transaction is HSR-reportable, especially before concluding that a filing is not required. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements. If you have any questions regarding HSR Act reporting requirements or the new thresholds, please contact the authors listed or your usual Orrick contact.